When you left a stable job with a Big Tech company five years ago to accept an offer from a seed-stage startup, maybe you imagined yourself in the group photo when your boss rang the bell at NASDAQ.

But you didn’t take this job to get rich. You were excited about working on something new with real potential. 

Five years later, your company just raised its Series C, and an IPO still isn’t on the horizon. Meanwhile, you need liquidity — whether it’s for a down payment on a house, starting a family, or another major life event.

The stock options you’ve earned are fully vested, but they’re just sitting there. So how do you turn them into cash?

If your company allows it, you can sell your shares to an accredited investor, assuming you can find a buyer who’ll meet your price.

That’s where the secondary market comes in. I spoke with Phil Haslett, founder and Chief Strategy Officer at EquityZen, a platform that helps startup employees sell a portion of their equity to investors looking to get in on companies before they go public.

We took a deep dive into how the secondary market works, its risks and rewards, and how aspiring founders could even use it to bootstrap their own startups.

Most tech workers don’t have a deep understanding of the secondary market, and that’s understandable. As Phil pointed out, companies often prefer to keep their shares closely held, and many founders and investors would rather not think about employees selling their equity to, say, a family office in Nova Scotia without their approval.

When we look at the startup world, tech journalists like me often lionize operators and investors for their boldness in the face of risk. But let’s be real: early startup employees take on plenty of risk themselves. 

Moving across the country or leaving a stable job at Google or Amazon to bet on an unproven company? That’s risk. Taking a lower salary in exchange for equity that might never materialize? That’s risk. Sticking it out through pivots, layoffs, and down rounds while waiting for an IPO that may never come?

Let me hear the people in the back: Yes, that’s risk!

And yet, the four-year vesting schedule — designed in an era when companies went public within a few years — is still the industry standard. Now that private companies are staying private longer than ever, is it time to rethink that model? Should employees be able to access liquidity earlier in their journey?

In this episode, we unpack those questions and more.

Disclaimer: This interview is for informational purposes only. Nothing Phil says should be interpreted as financial advice.

(0:00) I used Descript to create an elaborate cold open for this episode, please clap.

(3:19) The specific pain point that led Phil and Atish to start EquityZen.

(5:11) “ I've kind of gone through maybe two or three evolutions of the IPO markets since EquityZen started.”

(7:57) All things being equal, early-stage tech workers take on more risk than founders or investors.

(9:12) Few workers are well-informed about the secondary market, “but it’s not their fault.”

(11:38) “ At some point, employees start to decide that maybe where they want to work — or maybe where they want to keep working — might be informed a bit by what they can or can't do with their equity.”

(13:06) Should we keep the traditional four-year vesting schedule, or scrap it for something new?

(14:14) Typical reasons why sellers turn to the secondary market.

(16:25) EquityZen’s typical selling size and average investment size, as of November 2024.

(18:52) ” You're probably not gonna get a billion-dollar valuation for your shares purely based on structure alone.”

(20:45) Keep close track of your equity, especially if you think you’re going to be laid off.

(22:20) Consult a financial services professional before you start the process.

(24:16) “ The first steps are kind of just also learning if you can sell your shares.”

(27:04) “ The company that you held shares in: if it went to zero, would you regret that you didn't sell?”

(30:10) A framework for figuring out whether the secondary market is worth the time and trouble.

(33:25) Offer your employees liquidity without jeopardizing morale or financial stability.

(36:27) Phil’s founder pitch: “ We're gonna support you all along the way. We can help you with liquidity in the future.”

(39:16) Tips for approaching your CEO to ask about liquidity options.

Do you know a tech worker who’s fully vested? Share this article with them and they may thank you.

Thanks for listening!

– Walter.